Effects of foreign investment on the exporting activities of domestic firms evidence from Vietnamese manufacturing sector

Chia sẻ: ViSteveballmer ViSteveballmer | Ngày: | Loại File: PDF | Số trang:13

Thêm vào BST

Báo xấu

19
lượt xem 2
download

Download Vui lòng tải xuống để xem tài liệu đầy đủ

Using firm-level data, this paper examines the effects of foreign firm presence on the exporting behaviour of domestic firms in the Vietnamese manufacturing sector. Applying the Heckman selection model, we find that investment by foreign firms has a negative effect on domestic firms’ decision to export.

Chủ đề:

Bình luận(0) Đăng nhập để gửi bình luận!

Lưu

Nội dung Text: Effects of foreign investment on the exporting activities of domestic firms evidence from Vietnamese manufacturing sector

EFFECTS OF FOREIGN INVESTMENT ON THE EXPORTING ACTIVITIES OF DOMESTIC FIRMS? EVIDENCE FROM VIETNAMESE MANUFACTURING SECTOR PhD. Ha Thi Cam Van1 Abstract: Using firm-level data, this paper examines the effects of foreign firm presence on the exporting behaviour of domestic firms in the Vietnamese manufacturing sector. Applying the Heckman selection model, we find that investment by foreign firms has a negative effect on domestic firms’ decision to export. The proportion of exports for domestic firms declines through horizontal and forward linkages, but increases through backward linkages. We also find that the presence of foreign firms has varying effects on the exporting activities of state- versus privately-owned domestic firms, and low- versus high-tech firms. Keywords: export, foreign direct investment, domestic firms, spillover, horizontal linkage, backward linkage, forward linkage. 1. INTRODUCTION In recent years, many less developed countries have experienced a significant increase in foreign investment. Given that the effect of foreign investment can manifest itself in many ways throughout the economy, it is important to gauge what the effect has been. The indirect effect of foreign investment on domestic enterprises through horizontal or vertical linkages has been confirmed in many studies (Aitken, Hanson, & Harrison, 1997; Aitken & Harrison, 1999; Greenaway, Sousa, & Wakelin, 2004; Kneller & Pisu, 2007; Sun, 2009). While most of the existing research into foreign investment spillovers in developing countries focuses on productivity effects, fewer studies have examined the effects of foreign firms on the exporting activities of local enterprises. Using a large Vietnamese firm-level dataset, we address a number of questions about the relationship between foreign investment and the exporting activities of domestic firms. In particular, does the presence of foreign firms affect the export decisions of local firms, and if so, how and to what extent? What are the channels of influence and how do they make themselves felt? In our study, we take into account both internal and external factors that drive domestic firms’ exports, and the differences in the exporting behaviour of domestic private and state-owned firms in the Vietnamese manufacturing sector. In the case of Vietnam, little research has investigated these issues. Anwar and Nguyen (2011) focuses on the influence of foreign invested firms on the export activity of domestic enterprises on both export decisions and export performance on the cross-sectional data of 2002. In contrast to Anwar and Nguyen (2011), however, we analyse a richer updated dataset comprising 200,000 firms from the Vietnamese manufacturing sector over a 6-year period. While Anwar and Nguyen (2011) find positive horizontal and backward export spillovers 1 Thuongmai University; Email: vancam2612@tmu.edu.vn 897
898 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI from foreign investment to local firms on both the export decision and export share, our results reveal that foreign investment impacts on domestic firms’ exporting activity has changed in recent years. Export spillovers from multinationals to local firms are the focus of this study. We analyse the channels through which such spillovers may occur. While the results from this research are broadly consistent with previous studies, our analysis adds key contributions to the existing literature. First, we add to a limited number of studies focusing on export spillovers in developing countries. Using Vietnam as a case study, our analysis is among the first to examine the impact of foreign firms on the exporting behaviour of domestic firms. The second innovation of our work is bringing research up to date with recent developments. Thirdly, compared with existing studies on Vietnam which are based on cross-sectional data, we use a richer panel dataset that enables us to incorporate time variation when assessing the effect of key drivers in domestic firms’ exporting activities. The paper is structured as follows. The second section discusses the relevant background literature on linkages with foreign firms. The third section sets out the Heckman-based methodological approach and Vietnamese data employed in this study. The discussion of results in the fourth section expands on our finding that foreign investment exerts a negative influence on the exporting activities of some domestic firms. The final section provides the conclusion and offers some pointers on policy. 2. LITERATURE REVIEW Aitken et al. (1997) were among the first researchers to consider the influence of foreign investment on export spillovers to domestic firms. Taking the case of Mexico, they investigate the role of geographic and multinational spillovers from foreign firms in the export decisions of domestic firms for the period 1986-1990. Using panel data for United Kingdom (UK) industries for 1992-1999, Greenaway and Kneller (2004) examined the effect of foreign investment and concluded that the decision of a domestic firm to export is positively associated with the presence of foreign firms in the same industry. Using firm-level data, Sun (2009) found significant export spillovers from foreign investment to local firms in China. Making use of the Heckman selection model on firm-level data in some manufacturing sectors in China from 2000 to 2003, Sun (2009) concludes that domestic firms located in Central China all benefit from the presence of foreign investment, while domestic firms located in Western China all have negative spillovers from foreign firms. Sun (2012) investigates the positive effects of foreign direct investment on domestic exports in China by making use of a rich firm-level balanced panel dataset of 3,260 domestic firms during the period 2000-07. By using the Heckman selection model on firm-level census data in China, Chen, Sheng, and Findlay (2013) find evidence of positive horizontal and backward spillovers from foreign direct investment in Chinese manufacturing firms over the 2000-03 period. By making use of GMM estimation applied to panel data over the 2005-07 period for six manufacturing industries in China, Sun and Anwar (2016) find that foreign investment promotes domestic firms’ involvement in exports through raising competition in the textile industry. Anwar and Sun (2018) used a Melitz-type theoretical model on panel data in the Chinese manufacturing sector to show that an increase in the presence of foreign direct
INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 899 investment led to a significant increase in the export quality of China’s manufacturing sector, especially in Hong Kong, Macao and Taiwan. There is also evidence of negative or no effects from foreign direct investment on the export activity of domestic firms. Barrios et al. (2003) conducted a study using firm-level data from Spanish manufacturing firms for 1990-1997and found no significant evidence to support the hypothesis that local firms will export as a result of the export activity of foreign firms in the same sector. Ma (2006) used a Chinese dataset, comprising firm-level data from 1993-2000, to test whether exports by foreign firms increased the probability of exporting by local firms in China. He found that foreign firms from OECD countries have a positive influence on the decision of local firms to export, but the activities of overseas-based Chinese firms did not increase the probability of local firms exporting. For a number of developing countries, Estrin et al. (2008) focused on the export performance of foreign-owned firms. Using data on Ukrainian manufacturing firms for 1996- 2000, Lutz et al. (2008) find no evidence of FDI-linked export spillover effects on local firms. Using Heckman’s two-step selection model, based on data collected from 494 firms in 2001- 2002, they showed that the quality of the host country’s institutional environment does not affect the decision by foreign-owned firms to export. However, they concluded that the level of exports by foreign firms was lower in host countries where the institutional environment had a higher level of economic freedom. In the case of Vietnam, there are few studies in the literature dealing with export spillovers. Nguyen and Sun (2012) investigate the positive effect of foreign investment on domestic firms’ decision to export. They use a Heckman selection model to deal with firm-level panel data for 2003 and 2004 and find that foreign investment has significant positive spillovers for exports by domestic firms. They also highlight the role of firm-specific characteristics, such as firm age, average wage, import intensity and types of ownership, in the decision by domestic firms in Vietnam to export. Using firm-level cross-sectional data from Vietnam’s manufacturing sector in 2000, Anwar and Nguyen (2011) concluded that foreign investment has a positive and significant spillover effect on the exporting activities of Vietnamese firms. Based on Heckman’s two-step selection model, they found that foreign investment promoted the decision by domestic firms to export and boosted their export share during this period. They indicate that the presence of foreign investment in Vietnam significantly affects the decision to export and increases the export share of Vietnamese firms through both horizontal and vertical linkages. They also highlight the difference in domestic firms’ exports in terms of the level of technology of domestic firms, their ownership structure, and their geographical proximity to foreign firms. The literature amply demonstrates that foreign firms have an influence on the export behaviour of domestic firms. That influence can be positive or negative, depending on the characteristics and absorptive capacity of local firms. Foreign firm export spillovers can derive from both horizontal and vertical linkages and can be large or small, depending on the strength of the linkages between domestic and foreign firms. Whereas most existing studies have concentrated on horizontal export spillovers, (Anwar & Nguyen, 2011; Chen et al.,
900 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI 2013; Kneller & Pisu, 2007; Long & Hale, 2014) take into account both horizontal and vertical linkages. Apart from these studies, there is limited evidence of how foreign investment affects both the decision to export and the export performance of domestic firms. 3. METHODOLOGY AND DATA Model Firms’ export behaviour can be driven by many factors, both internal and external. Firm characteristics may affect both the decision to export and export volume. For example, a firm’s level of sales, labour costs, capital per worker, age, location, share of sales in the domestic market and so on, can influence a firm’s export behaviour. External factors, such as the presence of foreign firms, export share, the industry, and region specifics, can have an influence on the export activity of domestic firms (Aitken & Harrison, 1999; Karpaty & Kneller, 2011; Sun, 2009). Clearly, not every firm engages in export activity, because firms differ from one another in the characteristics that lead them to their own production decisions. Consequently, firms can choose whether to serve the international market, the domestic market, or both. Following numerous existing studies (Aitken et al., 1997; Anwar & Nguyen, 2011; Greenaway et al., 2004; Karpaty & Kneller, 2011; Kneller & Pisu, 2007; Sun, 2009), Heckman’s approach will be used in this paper. As a first step, this model allows us to test whether the presence of foreign firms encourages the decision of domestic firms to export. The second step is to test whether the presence of foreign firms affects domestic firms’ export share, conditioned on the export participation decision of domestic firms. Export participation in the first step is a binary variable, which takes the value of one for those firms that have export activity. Export share in the second step is measured as the proportion of exports out of the firm’s total sales during the year and can take any positive value from 0 to 1. The first step is the selection regression, based on the probit model, to estimate the probability of firms’ participation in export and control for factors which influence a firm’s decision to export. The second step is the outcome regression, based on the Tobit model, only for those firms which have export activities. The following equations illustrate our empirical model. The selection model at the first step is: expijt = α0+ α1scaleijt + α2capintijt+ α3lincijt+ α4locijt+ α5 ownershipijt+ α6 HorizontalFDIjt+ α7 Backwardjt+ α8Forwardjt+ α9 HHIjt+ α10PCIijt + α11year d + α12 industry d + α13lag_exportijt+ uijt (1) The second equation is the export intensity equation – the outcome equation. The export share (expshare) is zero when the firm decides not to export and assumes a positive value when the firm undertakes to enter the foreign market. Thus, the outcome model will be as follows: expshareijt = β0+ β1scaleijt+ β2capintijt+ β3lincijt+β3+ β4locijt+ β5ownershipijt+ β6Horizontaljt+ β7 Backwardjt+ β8Forwardjt+ β9 HHIjt+ β10PCIijt +β11year_d + β12industry_d + vijt (2) Where is the export dummy of firm i in industry j at time t, = 1 for exporting firms and = 0 for non-exporting firms. Variable is the export share of firm i out of total sales of firm j at time t. Following Anwar and Nguyen (2011) and Sun (2009), we use export share as indicative
INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 901 of a firm’s export performance, expecting to capture not only export volume but also the export proportion of a firm’s total sales. Export share can yield more information since it can show the importance of exports among a firm’s other activities. Variable capintijt is capital intensity, calculated by dividing capital at the end of the year by total labour at firm level. Variable lincijt is the firm’s labour income, obtained by dividing the total cost of labour by total labour at the end of the year. Variable scaleijt, measures the scale of the firm in the same industry, and is calculated by dividing firm sales by average sales in the same industry. Variable indicates the type of firm, equal to zero if firms are private and one if firms are state-owned. Variable locijt is the location of the firm, showing whether it is located in an industrial zone, and receives the value of one if the firm is located in an industrial zone and zero otherwise. These variables are at firm level, and are used to capture the effect of firm characteristics on their export behaviour. The variables of greatest interest to us — Horizontaljt, Backwardjt, Forwardjt respectively — indicate horizontal, backward, and forward spillovers in industry j at time t, calculated at industry level by linking the Vietnamese enterprise survey and input-output table. HHIjt is the Hirschman-Herfindhal index of industry j at time t – a concentration index at industry level. PCIijt is the provincial competitive index at provincial level and is used to capture the effects of the region on the export behaviour of domestic manufacturing firms. In the first stage, is the lag value of exporting – a dummy variable – indicating export experience. This variable acts as the exclusion restriction and does not appear in the second step. For the presence of foreign investment in spillovers, we employ a measure based on the proportion of total sales within the four-digit sector accounted for by foreign firms. Following the studies by Jude (2012), Fujimori and Sato (2015), Smarzynska Javorcik (2004), horizontal spillovers can be calculated as follows. (3) where Horizontal(jt) represents the ratio of total sales of foreign firms in industry j in time t and the total sales of firms in industry j in time t. FIsales(jt) is the total sales of foreign firms in industry j in time t, and Sales(jt) is the total sales of industry j at time t. This value is obtained from the Vietnamese Enterprise Survey dataset. The vertical backward spillover is based on the proportion of total output accounted for by foreign-owned firms in upstream sectors. This is calculated as follows: (4) (5) where measures the presence of foreign investors in k sectors supplied by sector j. Parameter is the output of industry k supplied to industry j divided by the total output of industry j, and Ykj is the output of firms in sector k sold to firms in sector j and Yk is the total output of sector k.
902 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI The vertical forward spillover is based on the proportion of output from sector h sold to sector j, and is computed as follows: (6) (7) where represents the linkages between foreign firms and their domestic customers. Parameter is calculated by the proportion of sector j’s output supplied to sector h, Yjh is the of output sector h sold to sector j and Yj is the total output of sector j. are obtained from the Vietnamese input – output table 2012. The Hirschman-Herfindahl (HHI) index of industry j refers to concentration in the market and can be calculated from the function below (Le & Pomfret, 2011; Newman, Rand, Talbot, & Tarp, 2015; Ni, Spatareanu, Manole, Otsuki, & Yamada, 2015) HHIjt = (8) Where xijt is the output of firm i in industry j at time t; Xjt is the total output of industry j. This index is calculated from the Vietnamese Enterprise Survey. There are different expectations for the given variables. The variables we are mainly interested in are the foreign investment horizontal linkage, backward linkage and forward linkage. Empirical evidence shows that these can have positive or negative effects on a domestic firm’s export behaviour, depending on the firm’s characteristics and other external factors. The inverse Mill ratio and rho values reported together with the two regressions show whether two stages have correlations. The Heckman selection model will be highly appropriate if the inverse Mill ratio and rho are significant and non-zero. Two approaches, maximum likelihood and two-step estimations, are used to obtain the main results. We also use Tobit regression as a robustness check. All the results presented in this paper are produced using R and Stata statistical software. Data This study uses data obtained from the Vietnam Enterprise Survey (VES) at firm and industry level. Conducted by Vietnam’s General Statistics Office for all industries every year since 2001, this survey gathers balance sheets and other information about firms’ activities. All firms are legally required to comply under Vietnam’s statistics law. All the data collected are checked by the General Statistics Office for internal consistency and are cross-checked with administrative provincial data before being made available for publication. The dataset covers 15 years (2001-2016) and is ongoing. Firms’ main annual activities are reported in this survey, including gross output, value added per unit of labour, total revenue, total employees, total assets and so on. As mentioned earlier, the data used in this study focus on the manufacturing sector. The raw data contains the sector codes for each firm in the dataset. By linking that code to the VSIC codes, we can see which sector each firm belongs to. All variables representing firm characteristics (firm-
INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 903 level variables) are included in the survey. The total number of firms in the manufacturing sector increased from 46,042 in 2010 to 68,588 in 2015, while the number of foreign firms rose from 5,141 to 6,608, accounting for 57.5% and 55.4%, respectively, of total foreign firms in Vietnam. Table 1 provides a summary of the data from the Vietnamese Enterprise Survey. Table 1: Summary of Data Domestic firms’ Year Total firms FDI Domestic Manufacturing FDI Domestic firms clean data 2010 280,541 8,939 271,602 46,042 5,141 40,901 36,840 2011 330,541 11,940 318,601 53,965 5,787 48,178 37,841 2012 359,287 8,610 350,677 56,389 4,965 51,424 41,607 2013 381,599 10,004 371,595 59,362 5,594 53,768 44,494 2014 415,656 11,179 404,477 65,496 6,273 59,223 47,525 2015 455,300 11,925 443,375 68,588 6,608 61,980 48,469 Source: Author’s calculation from the Vietnamese Enterprise Survey 2010 – 2015 Variables at firm level for sales, labour costs, and capital are available in the raw dataset and are given in Vietnamese dong, reckoned in thousands of US dollars by using the average exchange rate. The horizontal linkage and Hirschman-Herfindahl index are calculated from the VES. The values of and for equations (4) and (6) to calculate the FDI backward and forward linkages are obtained from the Input-Output Table, published by the General Statistical Office (GSO, 2012). There are 164 sectors in the IO table, and most of them can be linked with a 4-digit sector from the Vietnamese Standard Industrial Classification (VSIC2007). Sixty-three sectors in the IO table, linked with 63 four-digit sectors from the VSIC in the manufacturing industry, have been calculated for foreign investment backward and forward linkages. The outliers are retained in the final unbalanced panel dataset since they show the reality of Vietnamese enterprises. Table 2 is a brief statistical summary of the data used in this paper. Table 2: Statistical Summary of the Data Independent variables Mean Median Std. dev expshare 0.032 0.00 0.149 scale 0.621 0.063 6.101 linc 2.323 1.919 8.094 capint 37.06 21.17 132.83 Horizontal 0.39 0.37 0.22 Backward 0.66 0.63 0.25 Forward 1.64 0.57 2.25 HHI 0.048 0.009 0.23 PCI 59.52 59.67 3.17 Source: Author’s calculation from VES 4. RESULTS AND ANALYSIS The results presented in Table 3 were generated by using Heckman selection correction to test empirically for foreign firm influence on (1) the decision of domestic firms to export and
904 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI (2) the level of domestic firm exports. The correlation between the lag of export (lag_export) and export participation (exp) variables is 0.7 (strongly correlated) whereas the correlation between lag of export and export share (expshare) is 0.08 (weakly correlated), showing that lag_ export is an appreciated exclusion restriction. As maximum likelihood and two-step Heckman regressions produced similar results for the export participation and export volume variables of domestic firms in terms of signs and magnitude, we choose to report only maximum likelihood results. The inverse Mill ratio and rho coefficients are significant and negative, showing that there is a sample section in the data and that the Heckman selection model is the appropriate approach. We also report the Tobit regression as a check for robustness. In the initial selection regression, domestic firms’ export experience seems to have a significant influence on their decision to continue to export, which means that firms engaged in export activity in the previous year are more motivated to continue exporting the following year. This is consistent with the literature ((Aitken et al., 1997); (Alessandria & Choi, 2007)) showing that export sunk costs have a significant influence on the decision to export. If domestic firms already have an international market, the export experience they have acquired reduces their costs for information searching and building a customer base abroad, and this experience encourages them to continue exporting. There are interesting relationships between the export activities of foreign and domestic firms. As can be seen from Table 3, while there is a very significant effect from foreign presence on domestic firms’ exports in the same industry and in downstream industries, influencing both the decision to export and export share, no significant effect is found from foreign investment on domestic firms’ export behaviour in upstream industries. In particular, we can see from Table 3 that foreign investment may bring about a significant 12% reduction in the probability of domestic firms participating in exports in the same industry. The presence of foreign firms attracts the involvement of fewer domestic firms in export activity through horizontal channels. Normally, multinational companies bring the export market with them to host countries (Aitken et al., 1997), which may lead to an increase in competition in the same industries and discourage domestic firms from engaging in export business. Table 3: Foreign Investment and Export Spillover Heckman Heckman Independent variables Tobit (Selection eq) (Outcome eq) 0.23**** lag_export (0.015) 0.03*** -0.0005*** -0.0005** scale (0.0012) (0.0001) (0.0002) 0.003*** 0.0002 0.00003 linc (0.0004) (0.0004) (0.0003) -0.0003*** - 0.00008*** -0.00004* capint (0.00005) (0.00002) (0.00001) 0.53*** - 0.04*** - 0.022** loc (0.02) (0.007) (0.007)
INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 905 0.08* -0.07*** -0.05* ownership (0.03) (0.012) (0.01) 0.022*** -0.002** -0.0014 PCI (0.003) (0.001) (0.0007) -0.12** -0.15*** -0.04* Horizontal (0.044) (0.02) (0.02) 0.02 0.07*** 0.05** Backward (0.02) (0.02) (0.02) -0.03** -0.017** -0.017*** Forward ( 0.01) (0.005) (0.004) -0.025* -0.02* -0.006* HHI (0.03) (0.01) (0.01) -2.92*** 0.7*** 0.58*** Intercept (0.13) (0.06) (0.05) Year_dummy Yes Industry_dummy Yes 0.22 R-squared Inv Mills ratio -0.028*** sigma 0.32 0.6 Rho -0.089*** Observations: 256,775 19,154 Censored: 237,621 Observed: 19,154 Notes: Robust standard errors in parentheses (*** p
906 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI With respect to vertical linkages, we find strongly significant positive effects from firms with foreign investment on local firms’ export share through backwards linkages but no significant influence on the decision to export. This means that foreign firms in downstream sectors promote domestic firms which are already exporting to increase their export share, but do not encourage local firms to move into exporting. In Vietnam, domestic firms in upstream industries mainly supply inputs to foreign firms but these inputs comprise intermediate supporting products in small numbers (World Bank, 2016) It can be argued that Vietnam’s entry to global value-added chains comes through foreign investment and that this then leads to significant export-led growth. The facts show that many of Vietnam’s exports in the manufacturing sector have a high level of imported content and low domestic value added. To this extent, the situation indicates that domestic firms have become suppliers for export-oriented foreign firms but with low value-added tasks, such as packing and supplying basic materials (World Bank, 2017). When supplying foreign firms, local suppliers must follow the foreign firms’ requirements and the latter also transfer both technology and labour to domestic firms to help local suppliers meet their requirements. Local suppliers can learn from multinationals and improve their own productivity, which may lead to an increase in the export share of local firms. With regard to forward linkages, as in other studies (Kneller & Pisu, 2007) we find a negative relationship between the presence of foreign firms and the export behaviour of domestic firms in the downstream sector. This indicates that the increase in foreign suppliers results in less probability of export participation and also in a smaller export share for local buyers. The facts show that foreign firms have no connection with domestic customers or, put another way, foreign firm products are mainly intended for the international market. Thus there is no strong relationship with domestic firms in the downstream sector. Firm characteristics, such as firm size, labour costs, and capital intensity have significant effects on domestic firms’ participation in the export market. The larger domestic firms are, the more likely they are to participate in serving international markets. With respect to export share, we use the proportion of export volume out of total sales to determine domestic firms’ export performance. For capital intensity and firm scale, we have results showing the negative effect on export share. There is a high probability that firm scale and capital intensity have a stronger effect on firms’ total sales than on their export volume, resulting in a negative sign with those variables. However, the fact that these internal factors do not have much effect on the level of export activity implies that those factors exert influence on total firm production but not much on their export activity. Interestingly, state-owned firms tend to be more motivated to export but are less productive than domestic private firms. As presented in Table 3, ownership has a significant positive influence on the decision to export but a negative effect on the export share of domestic firms, which means that state-owned firms tend to be more involved in export activity than private firms but once they start exporting, they seem to perform poorly. This makes sense in Vietnam’s case because Vietnamese state-owned firms receive more support from the government than private ones do. As a result, they have more information available to them and greater opportunity to begin serving the international market.
INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 907 Moreover, state-owned companies in Vietnam work in certain specific areas, such as electricity, tele-communications etc., designed to secure the economy and mainly serve the domestic market. Nevertheless, they are large-scale monopoly companies and may have advantages over domestic private firms for entering the international market. However, Vietnamese state-owned firms are believed to be less productive than private firms. According to a World Bank report (World Bank, 2017) public investment is not as efficient as it should be, due to the uncoordinated and incoherent investment decisions of the fragmented state structure. The Bank report also argues that across the economy, most state- owned firms are inefficient producers. These may be the relevant reasons why state-owned enterprises are not effective exporting firms. External factors in the Provincial Competitive Index (PCI) have a significant positive effect on export participation but a negative effect on the export volume of domestic firms. The PCI is conducted by USAID and VCCI every year to evaluate the business environment at the provincial level. The provinces have their own policies for improving their own PCI and those with higher PCI attract more investment. It is readily understandable that the PCI has a significant positive influence on the decision to export but a significant negative effect on how much domestic firms export. Provinces with higher PCI attract more investment, both domestic and foreign, and therefore generate more competition. Domestic firms may find many opportunities in higher PCI provinces to begin exporting, but with greater competition, they may not succeed in improving their share of the export market. From the results, it is obvious that the location of domestic firms has a significant positive influence on their decision to export. This implies that firms located in an industrial zone are more likely to export than firms that are not, a finding consistent with the fact that industrial zone firms have greater advantages that support domestic firms’ export activity, since these zones have more advanced infrastructure and technology than non-industrial zones. However, location (loc) has a negative effect on domestic firms’ share of exports, represented by the export volume proportion of firms’ total sales. It can be said that location has a greater influence on sales than on firms’ export volume. For example, if an exporting firm locates in an industrial zone, its annual sales and export volume will both be higher than those of a firm located outside the zone, other factors remaining fixed, but the increase in sales will be larger than any increase in its export volume. 5. CONCLUSION AND POLICY IMPLICATION Our evidence suggests that the exporting behaviour of domestic Vietnamese manufacturing firms is negatively influenced by the presence of foreign firms competing in the same sector. This points towards the need for domestic firms to improve productivity in order to compete more effectively with foreign firms. The government could design more appropriate policies and strategies so that foreign investment leads to positive spillovers, thereby limiting the negative effects of foreign firms. The presence of positive backward linkages is confirmed in our study, suggesting that increasing the capabilities and technology of domestic firms to upgrade their supplier linkages with foreign firms would enable them to explore the international market. Additionally, we find that the export behaviour of Vietnamese manufacturing is influenced by a range of external factors, such as the location
908 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI of firms, market concentration, and type of firm. Moreover, state-owned firms are relatively more likely to export than private firms but place less emphasis on exporting. REFERENCES 1. Aitken, B., Hanson, G. H., & Harrison, A. E. (1997). Spillovers, foreign investment, and export behavior. Journal of International Economics, 43(1), 103-132. 2. Aitken, B. J., & Harrison, A. E. (1999). Do domestic firms benefit from direct foreign investment? Evidence from Venezuela. American economic review, 605-618. 3. Anwar, S., & Nguyen, L. P. (2011). Foreign direct investment and export spillovers: Evidence from Vietnam. International Business Review, 20(2), 177-193. 4. Anwar, S., & Sun, S. (2018). Foreign direct investment and export quality upgrading in China’s manufacturing sector. International Review of Economics & Finance, 54, 289-298. https://doi.org/10.1016/j. iref.2017.09.009 5. Bernard, A. B., & Jensen, J. B. (2004). Why some firms export. The Review of Economics and Statistics, 86(2), 561-569. 6. Blalock, G., & Gertler, P. J. (2008). Welfare gains from foreign direct investment through technology transfer to local suppliers. Journal of International Economics, 74(2), 402-421. 7. Blomström, M., & Kokko, A. (1998). Multinational corporations and spillovers. Journal of Economic Surveys, 12(3), 247-277. 8. Blomstrom, M., Kokko, A., & Zejan, M. (2000). Foreign direct investment: Firm and host country strategies. UK: Macmillan Press LTD. 9. Chakraborty, D., Mukherjee, J., Jaewook, & Ki-Dong, L. (2017). Do FDI inflows influence merchandise exports? Causality analysis on India over 1991-2016 (MPRA Paper No. 74851). Retrieved from https:// mpra.ub.uni-muenchen.de/74851/ 10. Chen, C., Sheng, Y., & Findlay, C. (2013). Export spillovers of FDI on China’s domestic firms. Review of International Economics, 21(5), 841-856. 11. Estrin, S., Meyer, K. E., Wright, M., & Foliano, F. (2008). Export propensity and intensity of subsidiaries in emerging economies. International Business Review, 17(5), 574-586. 12. Fujimori, A., & Sato, T. (2015). Productivity and technology diffusion in India: The spillover effects from foreign direct investment. Journal of Policy Modeling, 37(4), 630-651. http://dx.doi.org/10.1016/j. jpolmod.2015.04.002 13. Girma, S., Görg, H., & Pisu, M. (2008). Exporting, linkages and productivity spillovers from foreign direct investment. Canadian Journal of Economics, 41(1), 320-340. 10.1111/j.1365-2966.2008.00465.x 14. Greenaway, D., & Kneller, R. (2004). Exporting and productivity in the United Kingdom. Oxford Review of Economic Policy, 20(3), 358-371. 15. Greenaway, D., & Kneller, R. (2008). Exporting, productivity and agglomeration. European Economic Review, 52(5), 919-939. 16. Greenaway, D., Sousa, N., & Wakelin, K. (2004). Do domestic firms learn to export from multinationals? European Journal of Political Economy, 20(4), 1027-1043. 17. Heckman, J. J. (1977). Sample selection bias as a specification error (with an application to the estimation of labor supply functions). Retrieved from http://www.nber.org/papers/w0172 18. Helpman, E., Melitz, M. J., & Yeaple, S. R. (2003). Export versus FDI. Retrieved from https://pdfs. semanticscholar.org/e63c/ac71e50ac6ff664bbb8644390567e78bf25e.
INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 909 19. Jude, C. (2012). Horizontal and Vertical Technology Spillovers from FDI in Eastern Europe. IDEAS Working Papers Series from RePECs; St. Louis 20. Karpaty, P., & Kneller, R. (2011). Demonstration or congestion? Export spillovers in Sweden. Review of World Economics, 147(1), 109-130. 21. Kneller, R., & Pisu, M. (2007). Industrial linkages and export spillovers from FDI. The World Economy, 30(1), 105-134. 22. Kugler, M. (2006). Spillovers from foreign direct investment: within or between industries? Journal of Development Economics, 80(2), 444-477. 23. Le, H. Q., & Pomfret, R. (2011). Technology spillovers from foreign direct investment in Vietnam: Horizontal or vertical spillovers? Journal of the Asia Pacific Economy, 16(2), 183-201. 24. Love, J. H., & Mansury, M. A. (2009). Exporting and productivity in business services: Evidence from the United States. International Business Review, 18(6), 630-642. 25. Lutz, S., Talavera, O., & Park, S.-M. (2008). Effects of foreign presence in a transition economy: Regional and industrywide investments and firm-level exports in Ukrainian manufacturing. Emerging Markets Finance and Trade, 44(5), 82-98. 26. Ma, A. C. (2006). Export spillovers to Chinese firms: Evidence from provincial data. Journal of Chinese Economic and Business Studies, 4(2), 127-149. 27. Meyer, K. E., & Sinani, E. (2009). When and where does foreign direct investment generate positive spillovers? A meta-analysis. Journal of International Business Studies, 40(7), 1075-1094. 28. Newman, C., Rand, J., Talbot, T., & Tarp, F. (2015). Technology transfers, foreign investment and productivity spillovers. European Economic Review, 76, 168-187. http://dx.doi.org/10.1016/j. euroecorev.2015.02.005 29. Nguyen, D. T. H., & Sun, S. (2012). FDI and domestic firms’ export behaviour: Evidence from Vietnam. Economic Papers: A journal of Applied Economics and Policy, 31(3), 380-390. 30. Ni, B., Spatareanu, M., Manole, V., Otsuki, T., & Yamada, H. (2015). How will the origin of FDI affect domestic firms’ TFP?—Evidence from Vietnam. Retrieved from https://papers.ssrn.com/sol3/papers. cfm?abstract_id=3061329 31. Ruane, F., & Sutherland, J. (2004). Ownership and export characteristics of Irish manufacturing performance (IIIS Discussion Paper 32). Retrieved from http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1. 148.4655&rep=rep1&type=pdf 32. Smarzynska Javorcik, B. (2004). Does foreign direct investment increase the productivity of domestic firms? In search of spillovers through backward linkages. American Economic Review, 94(3), 605-627. 33. Sun, S. (2009). How does FDI affect domestic firms’ exports? Industrial evidence. World Economy, 32(8), 1203-1222. 34. Sun, S. (2012). The role of FDI in domestic exporting: Evidence from China. Journal of Asian Economics, 23(4), 434-441. http://dx.doi.org/10.1016/j.asieco.2012.03.004 35. Sun, S., & Anwar, S. (2016). Interrelationship among foreign presence, domestic sales and export intensity in Chinese manufacturing industries. Applied Economics, 48(26), 2443-2453. 10.1080/00036846.2015.1122733 36. World Bank. (2016). Vietnam 2035: Toward prosperity, creativity, equity and democracy. Retrieved from https://openknowledge.worldbank.org/handle/10986/23724 37. World Bank. (2017). Vietnam: Enhancing enterprise competitiveness and SME linkages. Retrieved from https://openknowledge.worldbank.org/handle/10986/28488